How did the scam of the century reach all the way across the country and into the pockets of the showbiz elite? It wasn’t hard at all.

Originally appeared in Condé Nast Portfolio March, 2009

BY: Amy Wallace

To hear him talk about the economic challenges facing the entertainment industry, you’d think that Jeffrey Katzenberg, CEO of DreamWorks Animation SKG, would be worried. Still, sitting in a meeting room on the DreamWorks campus, surrounded by plush toys commemorating his company’s biggest hits, Katzenberg speaks in a tone that borders on serenity.

“I tell people, ‘Wherever you are today, this is the new great,’ ” he says, a Kung Fu Panda doll looming over his shoulder. “The sooner you forget what you had, the better off you’ll be.”

Katzenberg’s Zen-like calm is especially surprising, given that just weeks before, he’d learned that he was among the Hollywood victims of Bernard Madoff’s Ponzi scheme. Both Katzenberg and his DreamWorks co-founder, Steven Spielberg, had millions tied up with Madoff, most of it money they’d set aside for charity and all of it probably gone. As Katzenberg speaks of the belt-tightening that is happening in Hollywood, it’s hard not to wonder about his own belt.

“If you look at where you were last summer, and that’s your measure of how you’re doing, it’s hopeless,” he says. His words could also apply to life after Madoff, I suggest. Katzenberg nods. His loss was humiliating, he admits. “It’s gone. It’s finished,” he says. He refuses to reveal how much “it” is, though public tax filings show his and his wife’s foundation had assets of more than $22 million in 2007. “I’m as lucky and as blessed as I can be,” he says. “Let’s move on.”

If only it were so easy. The names of Madoff’s other Hollywood victims are still gradually and grudgingly coming to light. Condé Nast Portfolio has learned that Arnon Milchan, the billionaire producer of such films as Fight Club and Pretty Woman, lost at least $18 million in the scam.

(Milchan declined to comment.) Actors Kevin Bacon and Kyra Sedgwick, who are married, have acknowledged that they too were taken.

How did so many smart people get so suckered? By Katzenberg’s own account, he had never met Madoff, never even heard his name. Katzenberg is not a member of the Jewish country clubs in Palm Beach and Minneapolis where Madoff and his agents trolled for investors. He doesn’t move in the social circles of New York’s Upper East Side to which many of the scheme’s patsies belong.

The answer, it turns out, lies closer to home. Katzenberg and Spielberg, like many people on the top rungs of the entertainment business, relied on the services of a personal business manager. Madoff had apparently figured out what industry insiders have known for years: More than agents, more than lawyers, business managers are the financial gatekeepers to Hollywood’s elite.

Since Madoff confessed to spinning a web of deceit that bilked thousands of people, universities, and philanthropic organizations out of an alleged $50 billion, two West Coast business managers have been embroiled in the scam. One is Katzenberg and Spielberg’s adviser Gerald Breslauer, who at 80 years old is widely revered as the dean of his profession. The other is Stanley Chais, 82, who has been helping prominent Angelenos invest their money for decades.

In addition to steering their clients to Madoff, both Breslauer and Chais reportedly have incurred huge personal losses themselves. But in Chais’ case, at least, that shared misfortune hasn’t prevented clients from suing. A magician and entertainer named Michael Chaleff was the first to file, accusing Chais, in a $250 million federal action, of “false, misleading, unlawful, unfair, and fraudulent acts and practices.” (Chais would not comment for this story.)

Then, on Christmas Eve, screenwriter Eric Roth—who won an Oscar for Forrest Gump—sued Chais in Los Angeles County Superior Court. In a classic good news-bad news scenario, the 65-year-old scribe had learned on the same day he was nominated for a Golden Globe Award for The Curious Case of Benjamin Button, a drama in which Brad Pitt ages backward, that his retirement nest egg was gone.

Fox hits up Hollywood A-listers to make a sequel to Oliver Stone’s Wall Street.

Originally appeared in Condé Nast Portfolio February, 2009

BY: Amy Wallace

Gordon Gekko is an ex-con, fresh out of prison. The year is 2009. The place: New York. In Money Never Sleeps, a script floating around Hollywood, Gekko, the corporate raider from Wall Street, is back. Now barred from trading, Gekko ­instead reads to poor kids in Harlem by day and hosts charity galas by night. He is an avid art collector whose cell-phone ringtone plays the crashing chords from Modest Mussorgsky’s Pictures at an Exhibition.

In a sign of how things have changed since 1987, the year that Wall Street was released, Gekko is now adept at manipulating Russian oligarchs, Emirati sheiks, and Macanese gambling barons. He recruits a brainy hedge fund analyst to travel the globe and do deals in his stead, and he tutors his young protégé in the ways of the rich. “Get your suits made at Gieves & Hawkes. Shirts at Turnbull & Asser. And go to Trumper’s. Get a haircut,” he says in one key scene.

In this imagined future, Gekko—played so memorably by Michael Douglas in Oliver Stone’s original—wants to gain control of the world’s richest oil field. Will he use it for good or for evil? Even if 20th Century Fox delivers on its plan to put a Wall Street sequel into production, moviegoers will never get the chance to find out.

That’s because, hewing to a tradition as old as Hollywood itself, Fox has ordered a rewrite. In mid-October, as real-world events seemed destined to disprove Gekko’s “Greed is good” mantra once and for all, Fox replaced the writer of Money Never Sleeps, Stephen Schiff, with a former stockbroker, Allan Loeb—and he got the job only after more than one A-lister said no (including Aaron Sorkin, the creator of The West Wing).

The studios love sequels, especially to movies that have struck the chord that Wall Street did. Released during the recession of 1987, the film perfectly captured a moment in American history, won Douglas an Oscar, and made Fox a boatload of cash. But delivering a sequel that lives up to a much-loved original is always a challenge, and a Wall Street sequel faces an even greater one now that a real financial crisis threatens to eclipse even the most dramatic fiction.

Two years ago, when the economy was still in overdrive, the timing seemed right to Stanley Weiser, co-writer of Wall Street. With Stone’s blessing, Weiser took an initial stab, picking up where the first film left off. It had always irked him that many viewers didn’t grasp what he had intended to be implicit: that Gekko was headed to jail. So his treatment begins outside a federal penitentiary on the day when Gekko is released. Then Weiser filled in the gaps.

Before turning himself in, Gekko travels the world as a rogue trader, à la Marc Rich, the fugitive financier controversially pardoned by President Bill Clinton. Gekko sets his sights on wringing riches out of Asia and setting up a hedge fund in China.

But the treatment was tabled when Stone had a falling out with Wall Street’s producer. Not long after, Schiff pitched Fox on an even more global approach. In his version, Gekko’s acolyte wins credibility with an oligarch named Oleg by traveling to London and buying him a Damien Hirst painting with $6 million of Gekko’s money.

Schiff’s script, which he delivered on July 22, contained some prescient details, considering he wrote most of it in 2007. It blamed the credit crunch and subprime mortgages for, in Gekko’s words, making “the gods fall off the mountain.” It even had Gekko spitballing about what might happen “if Lehman Brothers hits a rough patch.” Sources close to the project say Stephen Frears, whose 2006 movie The Queen earned an Academy Award nomination for best picture, expressed interest in directing. (Schiff declined to comment for this story.)

Yet as the financial picture worsened in late summer and early fall, Schiff’s script “suddenly felt out of touch,” says Alex Young, co-president of production for 20th Century Fox. “Stephen tried to shoehorn some things in there. But it was sort of like an ‘Oh, by the way.’ That’s no knock on Stephen: Wall Street is one of the seminal movies of all time. You don’t just casually wade back into those waters. You have to have a script that you love.”

BY: Amy Wallace

He’s Mark Zuckerberg’s coach, Bill Gates’ editor, Bono’s business partner, and an owner of Forbes. But Roger McNamee—the guitar-strumming soul of one of the quirkiest private equity shops in Silicon Valley—still hasn’t found what he’s looking for.

Backstage at a cavernous Denver nightclub called the Cervantes Masterpiece Ballroom, Roger McNamee sits in a blue plastic chair, cradling his Martin acoustic guitar and fretting. The veteran Silicon Valley investor looks around at the members of his new band Moonalice—six seasoned players whom he’d flown in, at his own expense, from around the country—and delivers the bad news.

“Nobody’s out there,” says McNamee, 51. On the other side of a flimsy, decal-covered door, the warm-up act, Storytyme, rocks out to a nearly empty room. McNamee frowns slightly and tucks wisps of his graying shoulder-length hair behind both ears. “The promoter said they would bring 50 to 100 people with them,” he says. “They appear to have brought between four and six.”

His bandmates nod solemnly. It’s not the first time they’ve outnumbered their audience. When someone mentions that Storytyme’s members are a trio of brothers in their twenties, Moonalice’s bass player, Jack Casady (who, in 1965, when he was in his twenties, joined the psychedelic-rock band Jefferson Airplane), sets down the World War II novel he’s reading. “That explains why there’s no one here,” he says, chuckling grimly. “Only one set of parents.”

McNamee shuts his eyes and keeps them shut. He made his name in a world far away from this grunge pit, whose floorboards stink of beer and where a chipped disco ball twirls slowly overhead. This Ivy League-educated, self-described geek has compiled a remarkable investment record that has given him near-wizard status on Sand Hill Road, the Bay Area tech industry’s main artery for capital. Known as a savvy strategist with a gift for anticipating technological change, McNamee has spent the past two decades guiding several top-performing funds—first at T. Rowe Price, the giant mutual fund manager, and then at two private equity shops he co-founded. Now he’s leading his third firm, Elevation Partners, whose profile—thanks to the involvement of U2 lead singer Bono—is even higher than the amount in its $1.9 billion war chest.

Originally appeared in Portfolio, October 2007

BY: Amy Wallace

In May 2002, Richard Parsons, then co-chief operating officer of AOL Time Warner, received a scathing letter from the widow of Jerome Siegel, the man who invented Superman.

  “Dear Dick,” wrote Joanne Siegel. “Have you been aware that your representatives have gone too far?”

In the mid-1930s, when she was in her late teens, Siegel had been the sketch model for Lois Lane. Now she was accusing Parsons’ company of trying to fleece her and her daughter of their share of Superman revenues. She called AOL Time Warner “greedy” and alleged a “heartless attempt” to rewrite history. “Just like the Gestapo, your company wants to strip us naked of our legal rights…. Is that the reputation you want?”

In the five years since Parsons received that three-page screed, Siegel’s outrage has found a more formal outlet: two lawsuits, both championed by a controversial Malibu litigator named Marc Toberoff. The 52-year-old attorney has made a career of taking on big entertainment companies on behalf of creators and their heirs. He has been especially successful against what is now Time Warner.

His most publicized victory came in 2005, when he persuaded a judge to enjoin Warner Bros. from releasing the movie The Dukes of Hazzard because it was based in part on an earlier film, Moonrunners. Six weeks before the Dukes premiere, the studio settled with the Moonrunners producers for $17.5 million.

In the pending cases, Toberoff is taking a different tack, asserting that the Siegel family has terminated the grants to the Superman and Superboy copyrights that Jerry Siegel had bestowed in 1938 and 1948, respectively. The Siegels have exercised a clause in U.S. copyright law that gives creators or their heirs a five-year window to reclaim rights to their works 56 years after the copyright was issued. Toberoff says this entitles the Siegels to half of all Superman-related profits earned since the copyright termination took effect in 1999—a sum he estimates tops $50 million—as well as any future profits. He also asserts that Time Warner has infringed the Siegels’ Superboy copyright with its Smallville TV series and thus owes unspecified damages.

Time Warner’s lawyers dispute these claims, saying, among other things, that the Siegel heirs have reneged on a settlement hammered out before Toberoff entered the picture. The attorneys also question whether the termination papers were filed correctly and say that, even if they were, the Siegel family has vastly overstated how much it is owed.

At stake is not just money but, potentially, the very future of the franchise. If the Siegel heirs prevail in winning back their copyrights, the result could be a similar challenge by the heirs of Superman’s co-creator, artist Joe Shuster. And if that challenge were successful, then Time Warner—which is currently developing a follow-up to last year’s film Superman Returns—could eventually find itself out of the Superman business altogether. How big is that business? Only Time Warner knows for sure (and it isn’t saying), but counting the Superman- and Superboy-related movies, TV shows, DVDs, books, comics, and merchandise, the conservative estimate is in the hundreds of millions of dollars. Toberoff says it’s $1 billion.

As the first suit moves toward a January trial, Time Warner has retained three law firms to keep the Man of Steel in the fold. Overkill? Not considering how much the company stands to lose—and the fact that it has lost to Toberoff before.

Reviled by some as the Hollywood equivalent of an ambulance chaser, Toberoff specializes in helping aging writers and artists (or their heirs) reassert their claims to decades-old properties. Then, in exchange for an ownership stake in the recovered rights, Toberoff tries to get new projects produced that are based on those properties, sometimes at the very same media company with which he just did battle.

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Now more than ever, risk-averse Hollywood loves remakes, which are seen as easier to market. That trend has created opportunities for Toberoff, who, despite what one executive has called “pushy and aggressive” tactics, has a knack for attaching himself to projects that studios want to make. For example, back in the mid-1990s, it occurred to Toberoff that the 1978 TV series Fantasy Island could be the basis for a feature film. He tracked down Gene Levitt, the series’ creator, and convinced him that it would be worth his while to dig his original contract out of the basement. Toberoff then proved that Levitt (who died in 1999) owned the show’s movie rights. Sony Pictures is now developing the series into a film to star Eddie Murphy. If it is made, Toberoff will collect a producing fee. (He won’t say how much.)